The paper develops a theoretical analysis of a profit-maximizing firm's behaviour in determining output and location in order to explain the suburbanisation of employment. This is done by deriving the supply curve of a firm whose locational choice is restricted to two locations, the city centre and the suburbs. The form of this supply curve indicates that at low levels of production the city centre is optimal but above a critical level of production optimality shifts to the suburbs particularly where residential suburbanization of the labour force has also occurred.
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